Antonio Bordunovi
The monster 20% leap in Nvidia’s (NASDAQ:NVDA) shares following its Q1 earnings report while the S&P 500 (SP500)(IVV) simultaneously slipped marked an unprecedented performance gap between a top-weighted stock on the index and the benchmark, Evercore ISI said.
Nvidia (NVDA) stock soared 19.96% in the three days after the late May 22 release of the AI chipmaker’s quarterly results and guidance that exceeded Wall Street’s targets. The company also said it planned a 10:1 stock split.
Evercore ISI said the surge prompted a question among its analysts: “Has a top 5 weight stock in the S&P 500 ever been +20% or more during a 3 day period post earnings where SPX (SP500) was down?” The broad-market equity gauge shed 0.97 index points during that period.
Answer: “There is no precedent for a stock of NVDA’s (NVDA) size having its post-earnings share surge ‘ignored’ by the broader S&P 500,” Julian Emanuel, Evercore ISI’s chief equity and quantitative strategist, said in a note Wednesday.
While it found several instances of “important” stocks such as Apple (AAPL), Tesla (TSLA) or Nvidia (NVDA) rising 20% in three days, Emanuel said either the shares were not yet a top-five weighted stock in the S&P 500 (SPY) or those rallies moved the index higher in tandem. The S&P 500 has never gone down simultaneously to a 20%+ advance after an earnings release, he said.
The “divergence is a catalyst for greater movement at the S&P 500 (SP500) level in front of other event catalysts,” such as the pending verdict in former U.S. President Donald Trump’s business records trial in Manhattan, core PCE inflation data due this Friday, and Nvidia’s (NVDA) 10:1 stock split effective June 10.
The firm recommended both market bulls and bears own convexity, specifically the 6/28 SPX 5,475C/5,150P “Strangle,” or a Buy Call+Buy Put strategy.
Here are some ETFs holding NVDA: (SMH), (SOXX), (SHOC), and (SOXQ)
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